CARI Captures Issue 655: The Philippines’ economy expands by 5.7% in first quarter of 2024

THE PHILIPPINES
The Philippines’ economy expands by 5.7% in first quarter of 2024
(09 May 2024) The Philippine economy expanded by 5.7% in the first quarter of 2024, surpassing the previous quarter’s growth of 5.5%. Key drivers were household spending, which increased by 4.6%, and a recovery in exports, rising by 7.5%. Notably, net exports sector growth rebounded to 9.5%, primarily led by the recovery in exports of electronic products. However, concerns over economic prospects persist due to El Nino-induced droughts affecting the agricultural sector, leading to a 3.8% inflation rate in April 2024, the third consecutive month of acceleration. Imports have slowed significantly, particularly in capital and raw material imports, affecting economic growth. Economists predict a growth rate of 5.8% for 2024 and 6.1% for 2025, albeit below trend due to high interest rates hindering private investment.

THE PHILIPPINES
Unemployment rate rises to 3.9% in March 2024, up from 3.5% in February
(08 May 2024) The Philippines’ unemployment rate rose to 3.9% in March 2024, up from 3.5% in February, according to the Philippine Statistics Authority (PSA). This increase resulted in approximately two million Filipinos being without jobs or businesses, up from 1.8 million in the previous month, based on a survey of 11,114 households. Concurrently, the country’s labour force expanded to 51.5 million from 50.75 million, leading to a labour force participation rate of 65.3% in March, compared to 64.8% in February. However, there was an improvement in job quality as the underemployment rate decreased to 11% in March from 12.4% previously.

INDONESIA
Starlink satellite company obtains business license to operate in Indonesia
(09 May 2024) Starlink, Elon Musk’s satellite company, has obtained business licenses to operate in Indonesia, allowing it to provide internet services across the vast archipelago. The network of low Earth orbit satellites can extend connectivity to remote areas or locations with limited communications infrastructure. The communication and information ministry confirmed the approval, stating that Starlink now has the right to provide telecommunication services in Indonesia. The company’s services will be trialled in the newly planned capital Nusantara on Borneo before a full launch at a later date. With the Indonesian government relocating the capital due to environmental concerns, expanding internet access is a priority, considering that only two-thirds of the population had internet access by 2022.

THAILAND, CHINA
Chinese EV makers fueling price war in Thai EV market
(07 May 2024) Chinese automakers are intensifying competition in Thailand’s electric vehicle (EV) market, leading to price reductions and a crowded market. At the Bangkok International Motor Show, BYD offered its flagship Atto 3 SUV at 18% lower prices than before, while Changan Automobile introduced the Lumin micro-EV priced at THB 480,000. Hozon New Energy Automobile’s compact EV is priced at around THB 550,000, further driving down prices. However, despite the influx of Chinese EVs, the market saw a decline in sales in February 2024, attributed partly to reduced government subsidies. While sales slightly recovered in March, future market growth remains uncertain. Additionally, Chinese automakers face competition from hybrid models, with some like Great Wall Motor turning to hybrid vehicles to avoid price competition.

VIET NAM
Global robusta coffee prices surge partly due to Vietnamese farmers switching to durian
(07 May 2024) International prices for robusta coffee have surged due to adverse weather conditions, increased consumption in Asia, and the rising popularity of durian fruit in China. Robusta futures in London reached a new high in late April, exceeding US$4,500 per tonne, contributing to the financial pressures faced by businesses. The surge in robusta coffee prices has been fueled in part by many coffee farmers in Viet Nam switching to durian cultivation due to its increasing demand in China, leading to a reduction in coffee supply. Vietnam ranks as the world’s second-largest producer of coffee beans and the largest robusta producer. This shift is compounded by factors such as the El Nino weather phenomenon, which has caused drought in Southeast Asia. Additionally, major European and U.S. companies are favouring the relatively inexpensive robusta variety over Arabica due to rising transportation and fuel costs. Rising consumption in Southeast Asia and China further strains the coffee market, with the Asia-Pacific region accounting for over a quarter of global consumption.

SINGAPORE
Deputy Prime Minister addresses Singapore’s equities market challenges
(09 May 2024) Singapore’s Deputy Prime Minister Lawrence Wong addressed Singapore’s equities market challenges, highlighting difficulties in attracting listings. Similar challenges have been observed in the UK and Hong Kong. He attributed this partly to the trend of high-growth companies opting to remain private longer amidst prevailing interest rates. Wong acknowledged the attractiveness of the US market due to its depth and liquidity. Despite this, Singapore is committed to encouraging locally incubated companies to list domestically. Recent reports suggest Singapore is exploring strategies to revitalise its stock market, prompted by a growing performance gap compared to regional counterparts.

MALAYSIA
Malaysia’s central bank maintains overnight policy rate (OPR) at 3%
(09 May 2024) Malaysia’s central bank, Bank Negara Malaysia (BNM), maintained the overnight policy rate (OPR) at 3% following its monetary policy committee (MPC) meeting, in line with economist expectations. It is anticipated that the key interest rate will remain unchanged until at least 2026. BNM stated that the current OPR level supports economic growth and aligns with inflation and growth prospects. The central bank remains vigilant about ongoing developments and seeks to ensure monetary policy sustains economic growth and price stability. Globally, economic growth continues, supported by strong labour markets and recovering global trade. Despite decreasing inflation, some advanced economies may maintain elevated interest rates, particularly the US. Downside risks to global growth include geopolitical tensions and financial market volatility. Inflation is projected to remain moderate in 2024, contingent upon domestic policy implementation and global commodity prices.

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CHINA
China’s exports experience modest growth of 1.5% in April 2024
(09 May 2024) China’s exports experienced a modest growth of 1.5% in April 2024, rebounding from a 7.5% decline in March. The increase was attributed to higher shipments of mechanical and high-tech products, although demand for steel and garments decreased. Exports to Brazil and Southeast Asia showed growth, while those to the U.S. and EU declined. Concurrently, China’s manufacturing activity expanded for the second consecutive month in April, but sluggish domestic demand prompted more businesses to sell excess supply overseas at discounted rates, contributing to trade tensions. China’s dollar-denominated imports surged by 8.4% in April, surpassing estimates, driven by significant growth in high-tech products and crude oil imports, notably from Russia and the U.S. Over the first four months of 2024, Chinese exports rose by 1.5%, while imports increased by 3.2%.

JAPAN
Weakness of Japanese yen spurs fears of currency war in Asia
(09 May 2024) Investors are contemplating the possibility of competitive devaluations in Asia, spurred by the Japanese yen’s decline to a 34-year low against the US Dollar, potentially intensifying currency tensions with exporting countries like South Korea and Taiwan. Despite efforts by Asian central banks to support their currencies, the yen’s slide poses challenges to the region’s export competitiveness. The yen’s weakness has prompted concerns about its impact on neighbouring currencies and potential disruptions to financial markets. While Japanese authorities have intervened to stabilise the yen, there are fears of a further slump, with implications for Asian and emerging-market currencies. China’s management of the yuan is crucial, as any significant devaluation could destabilise the region further. Overall, while the likelihood of such a scenario is low, it remains a concern for investors monitoring currency dynamics in Asia.

AUSTRALIA
Australia to maintain position of natural gas amidst energy transition
(08 May 2024) Australia’s center-left Labor government has released the Future Gas Strategy, aiming to ensure the affordability of natural gas and maintain its position as a major exporter amidst the transition to cleaner energy. Minister for Resources Madeleine King emphasized the continued importance of gas in supporting the economy through to 2050 and beyond. While the strategy has been welcomed by the industry, environmental groups and left-wing lawmakers have criticized the government for pandering to fossil fuel interests. Prime Minister Anthony Albanese’s government is phasing out coal-fired power generation and transitioning to renewables, but acknowledges the need for natural gas in the energy transition. The government also aims to address concerns about future gas supply, particularly for major buyers like Japan and South Korea, to whom all contracts will be honored.

15 participating countries	20 chapters	2.2 billion	US$26.2 trillion	28%
ASEAN member states, Australia, China, Japan, South Korea, New Zealand	trade in goods and services, investment, intellectual property, e-commerce, competition, SMEs, economic and technical cooperation, and government procurement	combined population, 30% world’s population	combined GDP, 30% global GDP	global trade (based on 2019 figures)